NOTE 11 – Restructuring Costs

In February 2017, the Company announced its plan to transfer its wafer fabrication operation at KFAB to other Company-owned wafer fabrication plants and external foundries. The Company ceased production operations at KFAB late in third quarter 2017 and plans to vacate the premises no later than November 15, 2017. Employees have been offered retention and standard severance packages. During the quarter ended March 2017, the Company received $6.0 million of insurance proceeds as a result of the fires sustained at the KFAB facility during 2016 of which $4.2 million is recorded in Cost of Goods Sold and $1.8 million is recorded in Other Income. During the third quarter of 2017, the Company recorded $2.0 million of asset impairment related to the shut-down of KFAB.

Total KFAB shutdown costs are expected to be approximately $10 million to $12 million, on a pretax basis, which will be expensed and paid throughout 2017. The table below sets forth the restructuring costs, recorded in restructuring expense in the Condensed Consolidated Statements of Operations, incurred during the three months and nine months ended September 30, 2017:

	Three Months Ended	Nine Months Ended
Early supply contract termination	$ -	$ 1,985
Cost of equipment relocation	429	501
Asset retirement obligation	701	935
Retention costs	909	2,687
	$ 2,039	$ 6,108

The table below sets forth the costs accrued related to the KFAB restructuring:

	Early Contract Termination	Retention Costs	Equipment Relocation	Total
Beginning balance, January 1, 2017	$ -	$ -	$ -	$ -
Costs accrued	1,985	2,687	501	5,173
Restructuring costs paid	(1,985)	(14)	(501)	(2,500)
Balance at September 30, 2017	$ -	$ 2,673	$ -	$ 2,673

Based on continued negotiations with the landlord, we recorded an additional $1.4 million of asset retirement obligations related the KFAB restructuring. This asset retirement obligation is for the estimated amounts to be paid to contractors to remediate the KFAB facility upon vacating the property. The table below sets forth the asset retirement obligation related to the KFAB restructuring:

Asset retirement obligation, January 1, 2017					$ 486
Accrual of additional asset retirement obligation					1,403
Amount paid					(1,125)
Asset retirement obligation, September 30, 2017					$ 764

In connection with the asset retirement obligation as of September 30, 2017, we have an asset with a net book value of $0.4 million in property, plant and equipment. During the three months and nine months ended September 30, 2017 amortization of the asset was $0.7 million and $0.9 million, respectively. The remaining balance will be amortized through the end of the lease.